Mexico announces over $4 billion in aid for struggling Pemex

MEXICO CITY (AP) — The government announced more than $4 billion in aid Wednesday for state oil company Petroleos Mexicanos, whose finances, production and exploration projects have been hit by the fall in crude prices.

The package will include a direct infusion of $1.5 billion to the company better known as Pemex, the Treasury Department said in a statement. The government will also provide over $2.6 billion to pay company pensions and retirements this year.

In return, the government wants Pemex to commit to reducing its liabilities and debt by the same amount.

“The adverse economic conditions that the hydrocarbons sector is going through on an international level and the depletion of different wells have weakened Pemex’s financial situation,” the department said in the statement.

Pemex reported in March that it had secured lines of credit to pay 85 percent of its vendors. The company closed 2015 with around $8.4 billion in debt, of which it paid $1.1 billion in the first quarter.

In late February, Pemex announced it was cutting about $5.5 billion from its 2016 budget, mostly in exploration and production.

Mexico’s oil production peaked in 2004 at about 3.4 million barrels a day but has since slid to about 2.2 million a day today.

President Enrique Pena Nieto sought to modernize the company and improve production by pushing through legislation that opened up Mexico’s energy sector to some private investment for the first time in decades. But the law was followed closely by the global plunge in oil prices, crimping the country’s oil ambitions.